Two Orange County brokers were arraigned Thursday at the Harbor Justice Center in an $11 million "Ponzi scheme" that prosecutors said lasted at least seven years and defrauded more than 27 investors, the majority of whom were senior citizens.
Joseph Francis Bartholomew, 75, of Lake Forest is accused of owning and operating MBP Insurance Services. Bartholomew is said to have taken investors' money, falsely promising to earn them 15 to 20 percent annually in returns.
"They heard from friends that they were getting 4 percent. This is a good deal. You should invest with this guy," said Orange County Deputy District Attorney Nagy Morcos. "And it was exactly too good to be believed but at the same time for a period of four six eight months (investors) were actually receiving their money back."
By March 2013, Bartholomew is accused of ceasing to make monthly interest payments to investors. Among the two dozen alleged victims listed in the criminal complaint is former Angels Baseball Player Bobby Rose, who lost $2.9 million, according to court records.
Bartholomew's co-defendant Wendy King-Jackson, 54, Laguna Nigel, worked at MBP as an insurance agent, prosecutors said. She apparently helped sell the unsecured securities, which were based on fraudulent insurance policies.
The California Department of Business Oversight did not authorize MBP to sell the securities, as required by law.
Bartholomew and King-Jackson are charged with more than 30 felony charges for their Ponzi scheme.
Local news from across Southern California
A Ponzi scheme is a fraudulent operation that offers investors high, short-term returns on investments. Instead of using the money to generate actual income and legitimate profits, the money from the investors is kept for the benefit of the defendant or used to repay earlier investors.
"If somebody approaches you and is promising you returns of 15, 20, 30, up to 40 percent, you really need to take a breath, step back, and think rationally, is this really possible?" Deputy Insurance Commissioner Byron Tucker said.
If convicted, King-Jackson faces a possible sentence of 16 years in state prison.
Bartholomew, who faces a maximum sentence of 42 years in state prison, is currently being held on $11.3 million bail. Before posting bond, he must prove that the money comes from a legal, legitimate source.